PhosAgro will increase its production by a quarter by 2020

"Phosagro" plans to increase production capacity by 2020 compared to 2016 by 24% to 9.2 million tons, the company said. "Ahead of the grandiose plans for the development of" Phosagro. " Our role in the global chain of food production will only increase, as we produce high-quality products, "the company's CEO Andrei Guriev said in the message. Back in March, Fosagro expected production growth by 20% to 8.7 million tonnes by 2020. The forecast for 2017 is 8.3 million tonnes (+ 40% by 2016).

It is important that such growth is achieved not by building new capacities, but by expanding the old ones, which is cheaper, says Raiffeisenbank analyst Konstantin Yuminov. There are many ways to exceed the installed capacity, especially since Phosagro uses new equipment, he says. For example, Acron on its site in Veliky Novgorod now produces ammonia more than originally planned.

Despite the fact that in 2013 the price of DAP (FOB Tampa) fell from $ 446 to $ 346 per tonne in 2016, the profitability of "Fosagro" on EBITDA increased from 23 to 39%, the report says. The expansion of production brings the company $ 180 million EBITDA annually. The key investment project "Phosagro" until 2020 will be the construction of ammonia production capacity of 760 000 tons per year, it should be put into operation this year. Also on the site of the company in Cherepovets will be launched the production of granulated urea with the capacity of 500 000 tons per year.

"Fosagro" can afford such an increase in production, Yuminov believes. It is one of the most cost effective, and such a gradual increase in capacity will be well absorbed by the market, he says.

In March, "Phosagro" told investors that it plans to maintain the level of capital investments not exceeding 0.5 EBITDA. The net debt of Fosagro at the end of 2016 was 112.3 billion rubles, the ratio to EBITDA was 1.5.

In the spring, Fosagro expected a 30% drop in capex in 2017 to 29.5 billion rubles. In general, until 2020, the company's investments will amount to 82.3 billion rubles. A large investment program "Phosagro" will be completed with the launch of ammonia and carbamide production in Cherepovets. Another 38.8 billion rubles. will require expansion of the phosphate mining capacity in Apatit.

As Guryev noted, over the past four years, the number of brands produced by Fosagro fertilizers has increased from 19 to 35, and by 2020 the range is expected to reach 40-50. According to the company's forecasts, the greatest demand will be for nitrogen fertilizers - they will account for 37% of consumption, for phosphates - about 36%.

The priority market for "Fosagro" remains Russian, and trading companies created in Brazil, Switzerland, Germany, Poland, France and Singapore provide "Fosagro" presence in all key export markets. Now the company sells 80% of fertilizer to customers directly, without intermediaries. Previously, UBS analysts noted that in 2011, "Fosagro" sold through traders 80% of products. The new strategy will allow it to increase the share of sales and get more information about consumers, experts say.

Analysts at Credit Suisse are positive about the expansion of the company's product line, this will support the growth of its EBITDA. The key risks include additional supplies of phosphates from China, Saudi Arabia and Morocco, which is delaying the process of price recovery.